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The H&P Report report would be screaming - - -

bearish, ITZ, IF -

We were just considering U.S. supply/demand factors.

But we are not.

Not are we not only considering domestic factors and global supply/demand factors but there is this geopolitical bump in the road CALLED A TRADE WAR with which we must contend.

The kill since 9/1/19 has been almost exactly as the model projected from the H&P Report. My interpretation of this is that the report is probably a fairly accurate report. Therefore until the VVVs go to cash settlement we may be looking at a kill that will be more than 6% greater than the same period last year. Besides that, hogs are running more than two pounds heavier than one=year ago. That's plenty bearish from the domestic standpoint.

But what about China? And the trade war?

I keep watching the price of hogs in the Eastern Corn belt thinking that is where Smithfield Foods has a greater presence. The price of hogs there does not seem to be any stronger than anyplace else.

There is still this matter of a "GAP" of +9.32 to consider. The model calculates that it will take an average daily gain of +0.81 in the component to close that "Gap". During the past seven-years the Index has only gained an average of +1.04 fro this date until cash settlement. The most it gained during that time interval was +6.16 in 2012. In 2013 it actually lost -6.14. I believe if we were just considering domestic demand, we would be staring a limit down move in the VVVs square in the face this morning.

But that is not the scenario we are facing.

The afternoon Purchase Index from Friday was up +0.21 and the model projects the component on Friday's kill will be up between +0.10 and +0.40. By the time the afternoon reports were released, packers had purchased 97.4% of the moving average daily purchases of total hogs and 98.0% on the Index hogs. On Fridays this percentage usually runs in the 120% range. This tells me that packers were buying a bunch of hogs Friday afternoon. Since Cutouts were quite strong Friday, my best guess is that the Final Purchase Index will jump a bit.

I piled more short VVVs onto my boat than usual. I suppose if the Chinese see American pork as a bargain, they could jump in today and buy the VVVs like crazy toasting me with a limit up move.

But that is not what the data seems to indicate might happen.

Best wishes,

Doc

Messages In This Thread

The H&P report was not a - - -
Re: DH, I hear the hog report-----
The H&P Report report would be screaming - - -
Re: The H&P Report report would be screaming - -
Thanks for the post, Dewey. Yes, the - - -